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Short-term shutdown won't hurt U.S. states, public finance: S&P

Television news crews set up outside the U.S. Capitol in Washington, October 4, 2013. REUTERS/Jonathan Ernst
Television news crews set up outside the U.S. Capitol in Washington, October 4, 2013. REUTERS/Jonathan Ernst

WASHINGTON (Reuters) - A short U.S. budget shutdown would not have a significant impact on the credit quality of states, local governments, non-profit healthcare centers, airports, roads, mass transit or public housing, Standard & Poor's Ratings Services said on Friday.

In a comment echoing those from the other two major rating agencies, Moody's Investors Service and Fitch Ratings, S&P said a long-term shutdown could hurt states and other parts of the public finance sector by slowing economic growth.

"Even if the shutdown were to persist, we don't expect automatic, wholesale downgrades on states," S&P said. "A protracted breakdown in federal negotiations could significantly undermine consumer and investor confidence and have significant, long-lasting consequences to the national and the state economies."

Currently, Congress is deadlocked over passage of the national budget, which led the federal government to shut down operations this week.

The major funding source for states - federal reimbursements for the healthcare program Medicaid - is untouched in the shutdown. S&P expects other grants to be delayed slightly, and that most states will not have to borrow to make it through. State revenues have been growing, providing a cushion for delayed grants or payments.

(Reporting by Lisa Lambert; Editing by Leslie Gevirtz)

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